PayPal Says Supersize Me in McDonald's Deal

The merchant-processing business is turning into a free-for-all as retailers are taking their traditional network leashes off and opting to try new payment methods. In the latest move, PayPal and McDonald’s are working through the first steps of a potential long-term relationship that speaks volumes to the changes taking place in the payments market.

Small-ticket merchants such as McDonald’s have an especially complicated challenge when it comes to electronic payments since it needs an extremely efficient combination of fast and low-cost payment types. It wasn’t until the networks addressed these issues with special small-ticket rates and signature-less transactions that these quick service retail giants could even begin to consider accepting cards for payment. Now that mobile payments are on the horizon, in-flight payment merchants like McDonald’s see the obvious advantage in being able to improve throughput by leveraging applications to drive preorders, promotions, and payments, not to mention favorable processing rates.

From a Reuters article:

“Demonstrations at the McDonald’s franchisee conference in Orlando featured a more “in-depth” service that would allow customers to order and pay using PayPal’s digital wallet and mobile application, the McDonald’s spokesman said.

Rolling out a service like this may help McDonald’s cut lines at restaurants, which is a key factor in maintaining and growing same-store sales, said Gil Luria, an analyst at Wedbush Securities. “If they can shave 10 seconds off wait times, same-store sales could go up a lot,” he added. “It’s substantial.”